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As the name suggests, this is a small-cap-focused fund with small caps constituting at least 65% of its portfolio. It can place the balance 35% in either larger companies or in debt instruments/ money market securities. It defines small caps as the companies that are smaller than the top 250 listed companies by market capitalisation.

Various studies have shown that small caps can deliver higher returns than large caps over the long term. However, the risk associated with them is also correspondingly higher. There is also a lack of liquidity in these companies and this is where a closed-ended structure helps. A fund manager does not have to worry about a spurt of sudden outflows.

However Sundaram’s previous funds have not capitalised on this advantage, it would seem. Out of a long range of previous Sundaram funds dedicated to small and micro caps, all the funds in the Sundaram Small Cap series (five funds in all) failed to beat their benchmark and half of the Select Microcap Series (12 funds in all) failed to beat their benchmark. This benchmark, the BSE Small Cap Index, common to both series, is incidentally the same for this fund as well.

Sundaram Select Small Cap Series

Series

Launch Date

Benchmark

Return % since inception

Benchmark Return

Outperformance?

II

21/11/2014

S&P BSE Small Cap

14.4

18

No

III

31/03/2015

S&P BSE Small Cap

15.9

22

No

IV

17/04/2015

S&P BSE Small Cap

16.1

19.6

No

V

23/06/2017

S&P BSE Small Cap

5.4

22.4

No

VI

17/07/2017

S&P BSE Small Cap

2.6

18.2

No

Source: Sundaram Mutual Fund, Viewed on 22nd Feb 2018. Returns greater than one year are annualized and those less than one year are in absolute terms.

Sundaram Select Microcap Series

Series

Launch Date

Benchmark

Return % since inception

Benchmark Return

Outperformance?

V

1st September 2014

S&P BSE Small Cap

28.1

19.8

Yes

VI

1st October 2014

S&P BSE Small Cap

24

19.4

Yes

VII

31st October 2014

S&P BSE Small Cap

24.1

18.9

Yes

VIII

21st October 2015

S&P BSE Small Cap

26.7

24.4

Yes

IX

5th November 2015

S&P BSE Small Cap

27.1

27.1

Yes

X

7th December 2015

S&P BSE Small Cap

27.9

26

Yes

XI

28th December 2016

S&P BSE Small Cap

31

53.3

No

XII

8th February 2017

S&P BSE Small Cap

29.1

39

No

XIV

28th April 2017

S&P BSE Small Cap

19.7

22.5

No

XV

31st May 2017

S&P BSE Small Cap

16.3

24.9

No

XVI

30th August 2017

S&P BSE Small Cap

10.5

18.2

No

XVII

13th October 2017

S&P BSE Small Cap

5.1

10.7

No

Source: Sundaram Mutual Fund, Viewed on 22nd Feb 2018. Returns greater than one year are annualized and those less than one year are in absolute terms.

Rupeeiq Take

Small-cap closed-ended funds by Sundaram haven’t beaten the benchmark. There is little reason to believe that this one will be different. However, as it’s known, past performance is not an indicator of future performance.